Subject: Insurance - Viatical Settlements

A viatical settlement is a lump sump of cash given to terminally ill
people (viators) in exchange for the death benefits of their life
insurance. Along with so much of the English language, the name has
its origins in a Latin word, viaticum, which means
provisions for a journey.

These settlements are attractive to a viator (seller) because the
person gets a significant amount of money that will ease the financial
stress of their final days. Viatical settlements are attractive to
investors for their potentially high -- but not guaranteed -- rates of
return.

The way it works in the simplest case is the investor pays some
percentage of the face value of the policy, let's say 50% just to pick
a number, and in return becomes the beneficiary of the policy. The
investor is then responsible for paying the premiums associated with
the life insurance policy. Upon the demise of the viator, the

investor receives the death benefit of the life insurance policy. If
the viator dies shortly after the transaction is completed,
the investor makes a large amount of money. If the viator survives
several years past the predicted life expectancy, the investor will
lose money.

Like any other deal, there are risks to both parties. For the viator,
the main risk is settling at too low a price. For the investor, there
are risks of not receiving the full death benefit if the insurance
company goes bankrupt, not receiving any death benefit if the insured
committed fraud on the insurance application, etc.

As of this writing, a few honest and a number of less-than-scrupulous
companies market viatical settlements to viators and investors. Be
careful! This investment is not regulated, so there is little or no
protection for investors.

Here are a few tips for potential viators.

Are you holding back from medical treatment, thinking this will
give you a larger viatical settlement? Don't. It won't get you more
money. Viatical providers take into account Investigational New Drugs
(INDs) when they price policies. Even if you never took any and don't
plan to, they expect viators will try anything that gives hope, and
they price accordingly.

Was your policy resold by the viatical company? If so, you have
no obligation to a second buyer -- unless you signed an agreement to
extend obligations to future owners. This is like selling a car: If
you sell the car to B and B resells it to C, you have no obligation to
C.

Be sure to check with your insurer to find out if your policy
includes Accelerated Death Benefits. If so, and if you qualify, you
will get much more money -- and it will be paid faster. This applies
to some group term life as well as individual policies.

Are you are a member of a Credit Union? Credit Unions may be a
source of information about and referrals to licensed viatical
providers.

Don't apply to only one viatical company -- even if the referral
was made by your doctor, lawyer, insurance agent, social worker, or
credit union. If you ignore this advice, you're likely to get
thousands of dollars less.

Here are a few tips for potential investors in viatical settlements.

Are you thinking of using your IRA for viatical investments?
Don't. No matter what viatical sales promoters tell you, life
insurance as an IRA investment is prohibited by the Internal Revenue
Code. And, if you have a self-directed IRA, you are fully responsible
for investment decisions.

Are you thinking of buying a policy that is within the
contestability period? Don't. If the viator committed fraud on the
application and the insurer discovers this, you could be left with
nothing more than a return of premiums.